Natural Gas Price Fundamental Daily Forecast – Hurricane Irma Hit on Florida Will Drive Down Demand

Natural gas futures rebounded on Wednesday to close higher as investors squared positions ahead of Thursday’s U.S. Energy Information Administration’s weekly storage report. Traders also monitored Hurricane Irma as it headed toward Florida, where it is expected to make landfall over the week-end. The exact location of this event is still unknown at this time.

October Natural Gas futures settled at $3.000, up $0.028 or +0.94%.

Last week, flooding from Hurricane Harvey in the Houston, Texas area had an impact on production. If the storm hits Florida and causes catastrophic damage as expected then demand will be affected. Floridians will be using less air-conditioning since massive electrical power outages are widely expected. This will lead to lower demand for natural gas from the power plants.

Nationwide, demand is expected to be down because of the end of the summer cooling season.

Forecast

Traders should continue to monitor the situation with Hurricane Irma even though it is not expected to hit Florida until the week-end. Once traders have an idea of where the hurricane will hit, they’ll be able to make position adjustments. For example, an east coast strike will have a greater impact on demand because it is a more densely populated area than the west or Gulf of Mexico coast of Florida.

Following Irma is Hurricane Jose. This is not as big as Irma and its direction is also uncertain at this time.

Today, traders will get the opportunity to react to the latest storage data from the U.S. Energy Information Administration. Traders should look for a build of about 63 billion cubic feet in the week-ended September 1.

That compares with a gain of 30 billion cubic feet in the preceding week, a build of 36 billion a year earlier and a five-year average rise of 58 billion cubic feet.

As of August 25, total natural gas in storage stood at 3.155 trillion cubic feet. This is around 7.0% lower than levels at this time a year ago and less than 1.0% above the five-year average for this time of year.

Given the situation with Hurricane Irma and its potential impact on demand, I’m looking for more downside pressure over the near-term.